Divorce: What happens to your house?

The song "Driving home for Christmas" probably expresses best that a house is much more than a pile of bricks. That it is, in fact, a vital part of one’s wellbeing. For me, as a lawyer specialised in (international) family law, it is very clear that a house is much more than an asset in a financial settlement.

As of 2018, Dutch Matrimonial Property Law has changed in the sense that for marriages entered into after January 1, 2018, premarital assets no longer become common property. This only changes if a marriage contract is drawn up.

However, one of the exceptions to his rule regards the premarital jointly-owned house. When two co-owners of a house decide to marry without a marriage contract, they run the risk that their house becomes common marital property, meaning that the value is to be shared 50 / 50 – even if it is not co-owned and / or financed 50 / 50, but for instance 40 / 60.

For grooms and brides to be, it might be wise to get some information about the consequences of this rule.

Tax facilities that preserve the family home

As a family lawyer and mediator, I am well aware that an arrangement concerning the marital home is often one of the challenges spouses have to deal with in a divorce situation. If preserving the family home is the goal, it might be advisable to work together with a notary to get a (new) marriage contract made, thereby creating – by notarial deed – community of property regarding only the matrimonial home(s).

This, as the 2018 Tax Law states, can be done without any tax consequences. The only condition is that any future division of the value of that community is to result in a 50 / 50 split.

This option can be useful in divorce cases where the spouses made a marriage contract agreeing to a separation of assets, but who now – after several years of marriage – are looking for a reasonable solution, based on the fact that they consider the matrimonial home to be “joint”, despite it perhaps not being equally financed by both and/or not registered in both names.

For my expat clients, sometimes choosing an applicable matrimonial law can already yield the desired outcome, by facilitating an asset transfer such as this without tax consequences. For instance, with the aim of allowing one of the parents to stay in the matrimonial home.

Bird’s nest

Due to the fact that a house can be considered essential to one’s well being, divorced parents sometimes decide to keep the family home and create a bird nesting situation, meaning that they fly in for alternating weeks, whilst the children stay in their normal habitat.

For children who have already lost their family basis, it often hurts even more when they have to move to a new house, which is not in the same neighbourhood or social environment.

Bird nesting, therefore, can be considered, at least for some time, essential for the benefit of the children. It also helps parents realise what they are asking of their children when – later on – a co-parenting situation is created whereby the children have to switch houses every week.

At my mediation table, I inform my clients that, in my experience, bird nesting only works for a limited period of time. It certainly ends when one of the parents becomes involved in a new relationship.

The inherited house

To my knowledge, one in ten Dutch estates has international assets, such as a holiday home abroad.

In inheritance issues involving my expat clients, international assets are more often the rule than the exception. When a family home is part of the assets, often not only is its market value of importance, but also its sentiments related to childhood or even lifelong emotions – which are often also culturally or traditionally-dictated.

Especially for expat clients who are accustomed to moving on a regular basis, the family home is sometimes the only anchor in a challenging life – making it much more than just a pile of stones to be considered in the case of a divorce or an inheritance. This is something that needs to be taken into account, aside from the fact that cross-border inheritances are already a legal jungle in and of themselves.

In 2015, the European Union introduced regulations aimed at simplifying cross-border inheritances, but there are still many tax issues left that need to be dealt with – especially as assets are still treated differently, from a tax perspective, in different countries.

In some countries, for instance, houses are considered in situ goods, but bank accounts are not, meaning that an inheritance involving a house of one million euros, a mortgage of one million euros and equities of one million euros is treated differently from an inheritance involving only a house of one million euros.

Increasingly, professionals involved in conflicts regarding (international) inheritances are realising that these conflicts are the consequences of rather existential issues, lending them a social complexity besides their growing legal complexity. Luckily, Alternative Dispute Resolution for inheritance issues or conflicts between generations is becoming more and more common in the Netherlands, where it is facilitated by specialised mediators.

The nice feeling of "Driving home for Christmas" – or "Flying home for Christmas", as the case may be – can only be whistled when a real home exists, old or new.

The author of this article, Edith van Ruitenbeek, is a lawyer and partner at Van Hilten Advocaten & Mediators, Nassaulaan 15 Den Haag and De Lairessestraat 129 in Amsterdam.